Blog

Do You Qualify For Debt Relief?

December 6, 2018

In earlier posts, we’ve devoted considerable time and energy to discussing common debt related terminology. We’ve discussed terminology associated with debt consolidation, for instance. This terminology is critical to grasping this important topic. Accordingly, our readers should definitely take time to master it. We’ve also covered concepts related to tax debt resolution, concepts such as offer-in-compromise, installment agreements and realistic collection potential. These concepts are also quite important. For our readers trying to resolve debt issues, the first step is becoming acquainted the concepts and terminology related to debt resolution.

In this post, we’ll discuss several of the more common forms of debt relief. As we’ll see, debt relief can take a variety of forms. Not all of these forms are permanent. There are some forms of debt relief which are temporary. That means that they only suspend a debt obligation for a limited period of time. The various types of debt relief that exist are important to understand. That’s because, sooner or later, most people will utilize or benefit from at least one form of debt relief.

Forbearance

This type of debt relief is temporary rather than permanent. When someone places a debt obligation into forbearance, he or she is still ultimately responsible for repaying this debt. Forbearance, however, allows the debtor to temporarily put their payment schedule on hold for a certain period of time. The most common types of debt which are placed under forbearance are student loans and mortgages. The procedure for accessing forbearance varies depending on the type of debt. All forbearance procedures, however, will involve a formal request or application. Importantly, though payment obligations are temporarily suspended under forbearance, interest nearly always continues to accrue, and so debtors need to understand that their sum will be larger than it was previously when they eventually restart their payments.

Deferment

Deferment is a type of debt relief very similar to forbearance. It’s distinguishable from forbearance when applied to student loan debt in one key respect. Like forbearance, deferment is a temporary form of debt relief. That is, the debt is not erased but, rather, only placed on hold. Unlike forbearance, however, deferment debtors do not accrue interest while the debt is suspended. As a result, when the suspension ends, debtors still owe the same amount originally deferred. But, deferment is only available for subsidized student loans. Unsubsidized loans don’t qualify. Accordingly, the only type of temporary relief available for unsubsidized student loans is forbearance.

Settlement

Unlike the two types of debt relief mentioned above, debt settlement is a permanent solution. It involves paying off existing debts with a sum less than the full face amount owed. Also unlike the two options above, debt settlement will have a negative impact on your credit score. This makes perfect sense. Think about it. When a debt is settled, the debtor essentially declares an inability to pay back the full amount. This, of course, is precisely the type of thing that’s frowned upon by lenders. Debt settlement can be negotiated for many types of debt. The two most common types of debt to be settled are credit card debt and back tax debt.

Obtaining a settlement isn’t easy. To qualify you need to demonstrate with firm evidence an inability to repay your financial obligations in full. Settlement can be the right solution for certain debtors, however. That’s because settlement can give a person a fresh start from which to build a better financial position.

Forgiveness

Debt forgiveness is similar to debt settlement in the sense that it is also a permanent solution. However, debt forgiveness is considerably more difficult to obtain than debt settlement. That’s because it involves the complete elimination of a given person’s debt without any penalties. One of the more common instances of debt forgiveness is forgiveness of federal student loans. There are several ways to obtain forgiveness of federal student loans. One such way involves completion of a “public sector” service program. That permits a borrower to be eligible for student loan forgiveness at the time of program completion. For many student loan debtors, this is an attractive opportunity and it has drawn a considerable number of volunteers. There are others.

Another instance of forgiveness is forgiveness of tax debt. This type of forgiveness is less common and is quite difficult to obtain. Tax debt forgiveness is occasionally obtained, for instance, when someone is able to qualify for “innocent spouse” relief. That could be a situation in which someone’s spouse brought in significant preexisting tax debt without their knowledge or control.

A New York Attorney to Fight For You

As stated at the outset, debt relief can take both temporary and permanent forms. The appropriate type of debt relief for a person depends entirely on their financial situation taken as a whole. For some, a temporary solution such as forbearance will suffice. This might work for someone with student loans that lost a job and needs time to find a new one. For others, with more serious financial issues, debt settlement might be the better option.

At Mackay, Caswell & Callahan, P.C., we understand debt relief in all of its different forms. That’s because we work with clients in all different types of financial condition. We’ve seen enough cases that we’ve become well versed in this area. If you’d like to benefit from our expertise, reach out to one of our top New York attorneys today. We’re be happy to assist. With offices throughout New York, including in Albany, New York City, Rochester and Syracuse, we’re sure to have an office near you!

As seen on

Client reviews

Mackay, you are a godsend. Thank you dearly for taking the time to go through in great detail options for our situation. You were patient, thorough and extremely helpful even after you knew we were unable at this time to pay for services. I wish other companies would follow your level of customer service.

I was in despair for years and now finally I have hope.

God bless, Tiffanie

“I had a BIG problem with the IRS and wasn’t making any progress with them, even with my accountant’s help. Then I heard about Mackay, Caswell & Callahan. I’m here to tell you that ALL the good things about those tax attorneys are true. Joe Callahan got a $30,000 tax bill reduced to $200! Thanks Joe, I still can’t believe you pulled that off! Christmas came early this year!”

William Poole on Google

“Joe was very professional and put my mind at ease! Up to date information and easy to understand! I highly recommend this firm and will have them do all of my tax work! A+ attorney!”

Sheila Abrahams on Google

“Joe Callahan has been exactly what my growing business has needed for far too long. Joe has been invaluable in helping me navigate and sort through issues past and present to keep my dream of owning my own business alive. Thanks Joe looking forward to many years of having you in my corner.”

Bryan Edwards on Google

“Joe Callahan helped me out of a big mess. I also went to several other “tax specialists” and got no good answers. Very professional and efficient. I would highly recommend him for complex tax issues. I could have saved a lot of time and money had I used his office earlier on.”

JC on Yahoo

“Mr. Callahan was able to resolve my tax issue quickly. He was up to speed on all recent tax code changes and successfully resolved my issue based on this information. His retainer was very reasonable and I am highly satisfied with the outcome of his hard work.”